Davis Brown Tax Law Blog

Tax Law Blog: Giving Back After Hurricane Sandy - November 20, 2012

As we approach Thanksgiving and the holiday season so soon after the destruction of Hurricane Sandy, many families and individuals find themselves considering charitable giving. Here are a few tips and tricks to consider:

Most importantly, make sure you are giving to a qualified charity. In order for your donation to be tax-deductible, the charity must be qualified with the IRS. You can easily check a charity's taxable status with this IRS Exempt Organizations Select Check Tool. Even if you aren't worried about the tax deduction, this is a good way to ensure the charity is truly a charity and not a scam.

Organizations filing for tax-exempt status to help victims of Hurricane Sandy may file for expedited handling of their application. To do so, write "Disaster Relief, Hurricane Sandy" at the top of the Form 1023. It generally takes several months to a year to process the application; it is unclear how "expedited" this handling will be. Of course, you can always avoid the hassle of filing a new application and donate to an existing organization which has already received tax-exempt status.

If you have sick days or vacation days at work which you will not use, consider donating the days back to your employer in exchange for cash payments by your employer to a charitable organization for the relief of disaster victims. The IRS has once again authorized this type of charitable donation. (It was also allowed following September 11, 2001 and Hurricane Katrina). The amount of cash donated by the employer is not taxed as income to the employee, and the employer can deduct the contribution. (The employee cannot claim a charitable deduction.) If you were not going to use all your vacation or sick days, what a great way to make a contribution, at no cost to the employee. Payments must be made by January 1, 2014, so you have plenty of time to consider this option.

If you or a family member live or work in the disaster area, you may be eligible to take a loan or a hardship distribution from a 401(k) or similar employer-sponsored retirement plan. In addition, some of the restrictions and limitations have been eliminated in an effort to make the process simpler. See the IRS announcement here.